Front Matter Page
© 2007 International Monetary Fund
September 2007
IMF Country Report No. 07/319
Tunisia: Selected Issues
This Selected Issues paper for Tunisia was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on July 12, 2007. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the Government of Tunisia or the Executive Board of the IMF.
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Front Matter Page
INTERNATIONAL MONETARY FUND
TUNISIA
Selected Issues
Inflation Forecasting and Exchange Rate Pass-Through
Prepared by Abdelhak Senhadji, Tahsin Saadi Sedik, and Kangni Kpodar (all MCD)
Approved by Middle East and Central Asia Department
July 12, 2007
Contents
I. Inflation in Tunisia: Trends, Core Inflation, and Forecasting
A. Introduction
B. Trends in Tunisian Inflation
C. Measures of Core Inflation for Tunisia
D. Can Inflation be Forecasted in Tunisia?
E. Conclusions and Policy Recommendations
Figures
I.1. CPI Inflation, Compared with Neighboring Countries, 1990-2006
I.2. CPI Inflation, Compared with Main Trading Partners and Comparator Countries
I.3. Behaviors of Administered Prices (month-on-month; 1990-2006)
I.4. CPI Inflation With and Without Food and Transport Prices (1991-2006)
I.5. Core Inflation: Excluding Administered Prices; Top Five and Top Ten Most Volatile CPI Components
I.6. Performance of the ARMA Model
I.7. Inflation and Monetary Aggregates (year-on-year, Monthly Growth Rates)
Tables
I.1. CPI Components, Weights, and Selected Descriptive Statistics, 1991-2006
I.2. Ten Most Volatile CPI Components, 1991-2006
I.3. Regression of Standard Deviation over 2000-06 on Standard Deviation over 1991-99
I.4. Average Contribution to Overall Inflation by Different Groups, 1991-2006
Appendix Tables
I.1. CPI Components, Weights, and Main Descriptive Statistics (1991-2006)
I.2. CPI Components, Weights, and Main Descriptive Statistics (1991-99)
I.3. CPI Components, Weights, and Main Descriptive Statistics (2000-06)
I.4. Average Contribution to Overall Inflation by Different Components
I.5. Individual Leading Indicators for Inflation (Bivariate Regressions)
I.6. Composite Leading Indicators for Inflation (Multivariate Regressions)
II. The Exchange Rate Pass-Through in Tunisia
A. Introduction
B. Theory and Empirical Studies on Exchange Rate Pass-Through
C. Exchange Rate and Inflation in Tunisia
D. The Degree of Exchange Rate Pass-Through to Consumer Prices
E. Conclusions and Policy Recommendations
Figures
II.1. Trends in Nominal Effective Exchange Rate, 1990-2006
II.2. Quality of the Prediction: Actual Versus Fitted Inflation Rate
II.3. Impulse Response Function of a 1 percent Depreciation in the NEER
Tables
II.1. Exchange Rate Pass-Through into Consumer Prices, 1995-2006
II.2. Exchange Rate Pass-Through into Consumer Prices: A Panel Approach, 1995-2006
II.3. Exchange Rate Pass-Through into Consumer Prices: An Instrumental Variable Approach, 1995-2006
Appendix Tables
II.1. Stationarity Tests with Monthly Data
II.2. Summary Statistics and Data Sources